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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowEli Lilly and Co. Chairman and CEO John Lechleiter received compensation valued at $12.7 million last year, down 22 percent from 2009 largely due to a change in how the drugmaker handles equity awards.
The maker of the antipsychotic Zyprexa and the antidepressant Cymbalta gave Lechleiter, 57, a salary of $1.5 million, according to a proxy statement filed Friday afternoon with the Securities and Exchange Commission.
He also received a performance-based cash bonus of $3 million, down 16 percent from 2009. A company spokesman said the bonus is based on the company's sales and earnings-per-share performance compared to a peer group, and Lilly exceeded that group by a higher margin in 2009 than it did last year.
Lechleiter received equity awards valued at about $8.2 million last year, down 27 percent from a total of nearly $11.3 million in 2009. That year, the company switched to a two-year payout period, and executives received two awards. One paid out in 2010 year, and another pays out this year.
In 2010, executives received one award that pays out in 2012, and the total could rise or fall depending on the company's performance.
Lilly earned $5.07 billion, or $4.58 per share, on $23.08 billion in revenue last year, with eight of its drugs surpassing $1 billion in sales. Zyprexa topped that list by bringing in more than $5 billion in revenue.
But the company faces big challenges. It loses U.S. patent protection for Zyprexa in October and then Cymbalta, among other crucial drugs, in the following years. Company leaders have long touted their pipeline of drugs under development as a key to filling this void, along with sales in international and emerging markets, and starting this year they will tie bonuses to the pipeline's performance.
Many analysts are doubtful of Lilly's strategy for handling what they call one of the worst "patent cliffs" in the pharmaceutical industry. The company's share price dropped 2 percent in 2010 to close at $35.04. In contrast, the Standard & Poor's 500 index climbed more than 12 percent.
The AP's formula for calculating executive compensation is designed to isolate the value that the company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.
The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the total reported by companies to the Securities and Exchange Commission.
Lilly will hold its annual shareholder meeting April 18 in Indianapolis.
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